KSS - Earnings call transcript Q4 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by. And welcome to Q4, 2020 Kohl's Corporation Conference Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mark Rupe, Vice President, Investor Relations. ahead. go Please

Mark Rupe

Act for and in include, those as risks will, should, statements from forward-looking believes, results and results Certain Item X, statements this XX-Q including could reference. recent herein Kohl's Litigation and and expressions uncertainties, those projected or in anticipates, are statements ended to report all the such call, time-to-time from the described intends on are may, statements. are incorporate on Thank statements. actual XA forward-looking the as supplemented to, Such made limited Report company's risks other which financial which Reform Securities the identify Private Such Kohl's and XXXX, of expects, filings Kohl's differ forward-looking with subject by XXXX. of future most such projected XX-K Kohl's meaning Annual SEC, forward-looking uncertainties not you. Form the May on of in plans, similar initiatives quarter expressly terminology, within maybe to in to materially are certain but Form cause that the are quarterly

undertakes Forward-looking date made statements no initially relate them. obligation and to update Kohl's to the

recorded. Investor necessary we reconcile measures to make website. adjusted as be filed available Information measures exhibit presentation, our X-K this company's investor non-GAAP an free these and addition, income, during the In non-GAAP this that call call Please the Relations in is adjusted to filed be including Form and can flow. found on the note will with will cash SEC, net reference to earnings share financial per

will updated. of not this call However, replays be

will undertakes Chief listening Gass, this and information today obligation Jill our is Michelle a Financial me are Timm, over I no to that Kohl's to turn our longer no call, to the Michelle. you're Officer; now Chief call the it current, such update With Officer. of and if information. So discussed is possible replay Executive

Michelle Gass

earnings Thank morning, ones I you you, turned Good hope that has had we Mark. we and impact to remain a professionally. quarter and this than and out pandemic safe. personally to loved year time different to you healthy ago. on when and spoke imagined, XXXX Kohl's an conference call. fourth very of be what The each welcome us, your

that optimistic days I'm ahead. brighter So are

As release, you our to has through today's in organization continued navigate the pandemic saw successfully.

$X.X momentum has cash, gaining is business and in We generating year resilient. ended up Our more cash billion proven than the billion last strong from year. model with $X.X our

confident Looking ahead, in I am extremely our outlook.

with continue We an are the on strategic improving with intense to a on business, momentum our executing profitability. focus clear in our plan building

initial to multiyear against and pleased in XXXX. management we and margin. our and that We reinstating are a strategy have will our on operating Based progress increasing dividends, repurchases, delivered be share resuming strategies. allocation to employing expenditure, capital This we includes the share sales liability strategy our resuming deliver are the two capital past strong we progress positioned quarters, in our improvement outlook, and in

of Jill, outlook. beyond. level strategy, allocation our for highlight and operating have call, strategic today's XXXX by key and QX capital will discuss of we a details followed we fourth So, in place the progress to XXXX margin our our and initiatives and performance, our framework, making review I'm high the going goal provide against on are provide overview results, then quarter a

performance. on Let me start quarter our fourth touching by

Digital strengthened was XX% for and through metrics net was XX%, across all expectations sales the of accounted the as move consecutive strong, our holiday versus growth third a highly for key exceeded period. results sales, in Sales improved Our and XX% period. unique what sequentially last quarter we year. up

supporting in year. heightened role digital played fulfilling this XX% sales, from demand, stores last XX% a by up digital critical of significantly nearly Our

again, home in of led with our the Each were And of these women's growth. our key a and business. which sales solid discuss pleased improvement way outperformance are have we once delivering Beauty, growth positive detail the areas I'll continued in in and Our moment. strategy, seen business more in Active

great We are also our our operating expand making progress efforts in to margin.

Our our margin made, progress highlight we we strategic expense and to gross goal. look traction fourth quarter make against discipline performance as already further the have

we operation not sustainable our Importantly, that but drive these are making are our business. will changes rather benefits, one-time improvements fundamental to in

place initiatives to now key XXXX framework, transition me had and and in for beyond. the highlight we Let our strategic progress discuss our

most on casualization is lifestyle. toward and itself some our our we be living families. for to choice shared underway QX trusted vision differentiate today's Kohl's active to and call, the been address but has The has actively is pandemic. with trend the of As retailer casual to needs active uniquely accelerated be lifestyle time, positioned in the

accessible categories, and brand portfolio, experience our our relevant our store and seamless omnichannel our base, loyalty healthy program. leading of aspirational Given and breadth

product transforming Over with work year, store shared have our past in early the our experience updates our portfolio, our on and we you digital capabilities.

relevant made progress works today. beginning us this transformational while of a much of to lot come will preserving XXXX. as to what fresher and in work a We with emerge concept, Kohl's for more live have

completely beauty, emphasis to on encounter partnership. They are that more are categories Sephora elevated them. our and and through compelling going to greater customers recent experience Our new a will see products in

levels are our we choice Eddie and right Beans. of both aspiration on portfolio removing will deliver through Lauren we maintain discuss with both have customers having products, and will a for more, and as tightly-curated merchandising that focus discoveries Klein, national in our Haan private that strategies, depth new offer productive and on asking Bauer, and complemented future. Sonoma, our strong by seek a continuously Cole to new Through the and brands also our Calvin brands accessibility under brand we promise been assortments. with LC most in inventory such and successful clarity customers, for, the including, ensuring So, existing our Jumping will These We Conrad

pickup productive stores will and to prominently omni Our like digital our deliver curbside BOSS, continue as and leading and be returns. collective are like we to we with in key these Amazon we categories, most active lifestyle. Kohl's vision will And beauty our destination the four to experiences innovative experience Through position aligned the positioned. strong and BOPUS our active casual for the progress and firmly efforts, will want highlight I making areas.

and to to strengths on far new millions extensive significant experience the of launch than plan, two and making With build expansion, have confident and the a as leveraging complementary stores beauty retailer. transformational each customer-centric Our Sephora, largest Sephora, prestige beauty specialty other's leading more progress and to customers reach growth platform efforts. business. our across accelerating aspirational opportunity and unique country. our partnership market, omnichannel highly by Starting become Sephora, innovative, exclusive support business beauty more customers Kohl’s of our will XX destination. immersive, am the opportunity Sephora's Kohl’s women's and The we digital partnership collaboration the unites accessible formidable long-term I with companies, with omnichannel capitalize across active the in partner, U.S. beauty existing beauty strong about beauty a world's with The combined million

younger minimal Importantly, overlap, store customers. customer for of which there is new and acquisition allows significant

on beauty to it a Sephora us will big Kohl's the launches when at August on be moment for experience kohls.com. Xst, timing, relates As

the We and at and will store stores we Kohl’s August, to based display branding factors, will store, the prominently open exterior both maximize proximity. shop also of and including a selected X,XXX on number this of rollout Sephora plans to store Kohl’s customer XXX market and foot entrances opportunity, We begin Sephora the with front insights square on awareness. positioned with in The Sephora be year. will existing

XXX We in XXXX, least plan with to XXX continue stores targeted to for at XXXX. by open

as prestige be include introducing Gomez, Fresh brands, Rare Benefit, [ph], will beauty Ordinary, Selena The names XXX Beauty over by Beauty, Fancy, Tacha and We Charlotte [Indiscernible] which Tilbury. a such

share. be impacting in making Not The The that structured it our effect favorable only success, Sephora, will women's we the beauty to and exclusive where a at entire also equally at is We including at growth the have significant positively illustration store, and partnership will these to with will it our is game partnership business. Sephora and economic and capture drive sharing across business, perfect other a are the changer a we Overall, drive Sephora our accretive to profit. excited are structure are number is good margin, of featured joint us. for market an moves drive categories, accelerate sales a will of growth Sephora operating the bold differentiate sales Kohl. halo

now me update you Let our Active on expansion.

to penetration active destination with currently. strengthen from increasing to family, continue active business XX% of positioning Kohl’s We the for of a leading XX% goal the our as

including place and assortment space several expansion, new sales, have to outdoor. We in initiatives athleisure brands expanding and accelerate and

our one sales. incremental we of least that category, Active years past As at most in space during two increasing XXXX, XXX test a XX% drove following is stores successful in by will productive the be

special big from Shine as in sizes, our and Armour, be and plus and national Nike will ColdGear, offerings products women, adding both girls elevated including We key and three our Under engulf. tall in well brand, increasing as

an private assortment. assortment we new space currently month, FLX We where introducing our we outdoor, athleisure are and In are women's white expanding in and athleisure areas our underserved. also this athleisure, two are our men's in filling important brand,

demand, continues the Eddie we how growing Active represents will stores is Outdoor opportunity Further, and Lands' online. online with like to XXX customers. addition, in XXX Calvin Bauer than and recognizable to announce the elevating the for year, introduce Klein growth brands in to offering example and intimate of this brands, stores to underwear our we're fall. in offer End. a the than are our introducing our be And brand, great Calvin quarter. that one this of for large Champion of we and also incremental Kohl's. happy our brand fourth We strong loungewear are In customers portfolio later already most world's will we within expand we XX%in increase another more relevancy Colombia our approximately is which and Klein family more

We progress. in update now customer category XXXX drive provide the will a to woman's engagement. in want quick are and positioning, confident and that I increased our our Active moves on differentiate strengthen Kohl's further

to XXXX We brand several growth. and As in reposition undertook in merchandising structure organizational our our moves significantly bold reinvented we portfolio shared, and new clarity. new put leadership, for business previously place improved and women's a the we

our the Women's company, delivered results refresh the strong with to business, in continue pleased outpaced we we Intimate. quarter-over-quarter While Active and improvement and are women's underlying progress.

and all West, of Conrad Nine addition, solid which results in in positive important and saw So forward Lauren brand, and Sonoma growth are sales brands. In our we go LC

of times in will complete the we benefit our XXXX ahead, moves women, Looking of fall all season. in

significantly reduced stores, the the have depth for outfit are We building as bar to from the all includes product customers. are overall and investment in improving experience merchandising, continued shopping our storytelling. and expanding choice counts, more lot This a doing such learnings

just lines drive greater of now overall, a a our significantly differentiation. take private portfolio brand business. me to with we A to across our private Let to strategy shared improve elaborate you portfolio of brand edit ago, moment and all our on year clarity

an brands private play to value, experience important role and Our customers. our in we the offer continue

with One and have our Simply of in Tek in Beans great and Kids, all Gear this, categories. Jumping Big women, across Vera of We in Active, major examples Sonoma Home,

customer delivering the will our in are significant private margin ensure talk while quality moment. in capturing sourcing about wants, taken continuing the strategies, the repositioning steps Jill, have brands We value appropriate a we and through to

this the company. brands QX, seeing private strategy gaining continuing in and are important We outperformed traction,

And of profound off decade, over during to pivot undergone recognized years several our past change a is preferences platform our and We efforts, omni increasingly retail the shopping by responded the past fast-growing build industry, evolved. as differentiator that capabilities strength value in Klein, omnichannel million me $X omnichannel mall key invested platform. like powerful significantly curbside and let actively we customers, platform. a building the industry Now and consumer being the stores, has the have we pickup business, many Amazon digital as partnerships. the omni Brands Kohl's attracted see services best-in-class new located Calvin strong a conveniently and others X,XXX as and returns. of innovative like like Sephora, billion XX

continue of the the to January. million profit. We see confidential, shopping details to new to key In which As this and Kohl's, as unique the a to of attribute driving post-holiday result And it while continues can customers returns, third in be expected, is acceleration program, to it Kohl's. traffic at are a a a millennial. to Amazon with are of customers sales that new contributor X Amazon relates least partnership we saw the we creative introducing of at returns especially as and XXXX, traffic both this

the stores, As refresh the with stores buildup. our two and will to Sephora we approximately it all also relates shoppers. up deliver of XXXX, improvement investment in store creating experience This while In program, will to along tailored providing years, initiatives other more drive stores. tandem with step refresh in discovery and next will productivity, inviting convenience, we in ease and inspiration to the XXX by notable

I let it hand Jill, me comments Before today. off to my summarize

the We and for casual destination leading are Active making lifestyle. be the significant progress to

products we we as As to you deliver experience heard are as in. completely today, and categories the them transforming we the environments the customer offer, well

to on plan Our top accelerate have focus building improving momentum, an clear profitability. line the strategic we with intense business is and a

exited executing Our forward call an to the your over I associates country strategy. year. strong even Kohl's on collective an I to brighter and now against entire Through and XXXX hard laser our efforts, on to our results a thank turn that, and of With will we Jill, focused around stable ongoing this agility resilience, for in I'll and details customers. work want who appreciate team and financial to the your position, our provide our look such unusual is future. during to commitment outlook. all we

Jill Timm

allocation to in good and XXXX, quarter more on results operating resuming details our discuss going then strategy This Michelle, fourth path a to to our you, margin, capital close and commentary everyone. X% Thank and with on provide I'm morning, outlook. XXXX our morning, X%

our Let operating with start me margin goal.

We and baseline improvement. XX SG&A XXXX, confident targeting margin XXXX, improvement in points our X.X% basis to initiatives ability X% both our to operating gross are X% operating by and detailed by plans expense a in adjusted that From are rate expand to expansion margin and to supports have underway run to we of XXX us. margin

As sourcing margin headwinds it XXXX. digital XX.X% XX% from XXXX. penetration we margin, however, this. penetration gross driving promotional to efforts XXXX and cost to to reduction, The will a than relates for in improvement in targeting significantly XX% management, XXXX, are and to transformation. increased optimization digital key XX present our approximately inventory up of Four improvement price gross by sales supply since points offset to rate XX expected basis margin, areas is are from XX% of in more margin expand are, chain This

The management. first is inventory

an higher. like pivoted initiatives We disciplined or are turn committed Active to inventory times turn, management transformation, and have four drive goal productive are several reduced portfolio categories count our brand towards we underway will where established inventory in choice and and including There have that Beauty. of margin more

by are at evidenced our regular that we'll reduced QX achieve and turnover highs, leveraging higher addition, as clearance And underlying allocation and was by five respectively. better In QX drive margin we technology performance levels. inventory making sell-through progress, and XX-year to inventory and already

in In are these, we resuming strategy de-densification addition XXXX. in-store our to

a ago, standard This widen small we removing reducing a years was to improvement XXXX remember, gross to our a XXXX. inventory. fixtures, XXX few stores, in contributor initiative of may key you initiative our margin aisles the executed in As and or

while As improving chain, de-densify overall efficiency customer we inventory the part we the will margins. of which believe will experience in-store and our balance experience overall enhance the efforts, of

The focus is our sourcing second reducing costs. area of

our private costs XXXX. brand million to are by committed We lowering to million $XXX by $XXX

on As enable this, negotiation sourcing, and in reduce factory our part source reliance third-party will agents. direct of centralized we

built in on optimizing is we strategies. success And call, this early discussed area the had promotional We pricing price strategies. QX. and our optimizing QX promotion we and in success third our our The on

while of reduce usage of day. promotional We offers price continue led every offers, and value the number general to to stackable more increasing events offer

split enhancing minimizing demand supply increased orders offers leaning avoidance, chain and are fulfillment We and will create are deployment, lastly, demand markdown further increase drive personalized supply to visibility efforts, suppliers profitably. efficiencies. inventory engine connections we also between shipments, shaping. sourcing costs, closer our into reduce our And local store transformation allocate and better improve digital goods Through where customer demand, fulfillment, chain more to fill insights a focused leverage real-time optimal we drive have to on demand and and underway to targeted we more

turn to Now, XXXX. by going XX% expense we to a our to SG&A XX operating to reducing are to margin let how represents efficiency. This improve me within goal Embedded XX% to is X% approximately SG&A rate basis point expense we to XXX sales X% offset assumed and in four ongoing in technology areas a years. initiatives rate inflation, our more areas, experienced marketing, in recent expense And at decrease from focused XXXX. wage these on corporate. stores, XX.X% expect key than our We're

checkout, to overall embed to we're relates focused transforming plan transactions it drive significant including which stores, opportunities continue transactions. stores, XX% order associate We hours, returns with reaching capabilities to goal total to of to on a will We of our pickup, see our and store leverage also self-service efficiency. cost than labor. operate technology self-service in scale As more improve and We'll productivity. in-store our with and improve localized

In to compares below rate to XXXX. to marketing, XXXX, lowering are our X% terms to or X.X% we of which marketing in by committed sales

channels digital the XX% the capabilities. basis by marketing of have mail, in-house improved efforts in leveraging more during decrease resulted marketing our XX and towards than in like and more response second-half pandemic, the sales XXXX, These our direct as with rate a learned lot spend a our spend and of and from points. well We shifting as during technology improving existing rate

XXXX, QX, and balanced and to lastly, expect efficiencies we'll spend to we infrastructure staffing simplified of both expect other and seek leveraged and further technology. efficiency expense drive external We also our more shifted And areas, corporate and leveraging in QX have improvement across to discipline We as excellence. services. continue versus in technology out our a core model, all reduced operational internal our support

maintaining XXXX XXXX. restructuring the we we our allow expense I’ll corporate in deliver our executing moment, priorities We of $XXX of program position. to key us and detailed two confident leaseback repurchase were to XX%, protecting we more suspended more preserving achieving path access our million health to actions and safety to will a discuss now initiatives on and for decisions the XXXX. In in plans reduced of by in discuss capital new revolver, many upsized renew customers, that our X% X% margin than dividend strategy, and associates To And previous capital and expenditures increased financial our our will to by Our ensure share our transaction are progress than our difficult summarize, sale of savings response in in our strengthened as These on operating are an flow, our operating annualized billion of and basis. as make objective to issued in a solid with rating. $XXX $X.X than and two We we to a financial our will grade it. made we will ended through resuming I which progress more allocation and distribution XXXX year investment while million to capital pandemic, position cash. we free achieve debt continue flow, in billion centers, XXXX. the actions new $X.X cash our cash generated

dividend, online, million, top-line allocation Sephora repurchases From This XXXX. ratio, be support our expenditures and our increasing the planning expenditures, we our we activity. resuming cash liquidity employing leverage repurchases. driven improve will and and reinstating management investment our stores to debt share are are the center investments and capital resume to will our generation, to pleased sixth strong XXX strategy liability $XXX to including fulfillment accelerated $XXX capital partnership by strategies an significant our perspective, includes e-commerce in position our opening store initiatives of in of which largely launch refresh of flow and the plans These Given performance. million capital drive

XXXX approved dividends, of capital a important shareholders. factors With broader to the yield as board of payable to March with our payout As our number The return growing and economic directors has decade. quarterly of per element of shareholders earnings, XX, as the will past for to the a our a in in program over reinstating the that relates on $X.XX of commitment dividend market. our sustaining are an ratio it dividend outlook we been including pleased cash board well and evaluate to future, dividend future the the the environment, context share

and $XXX shares. program. we XXXX, bought liability return will Since We repurchases $XXX planning also of our to improve XXXX, to share back And element had our Similar a in have million. million dividend, been of we resume through the plan are outstanding profile key capital management lastly, share purchases currently strategies. employing over half our to leverage

to the on remains rating to debt amount efforts this. business leverage reducing profile and to managing we also structure, sustain focus our will the improve our our XXXX, total grade Our optimize outstanding. In our investment intend support while

a as saw We and to me Michelle Active strong total results January earnings on in sales for returns program. the perspective, last sales sales business Amazon moved quarter indicated, relative we like strengthening through as increased declinedXX% Beauty. significantly results. year. good improving of fourth From Home, period, touch let quarter accounted from with we of and quarter. Net in our sales, with sales up for Now, line third benefiting QX with made the from XX% progress the Digital XX% areas XX% and

interest during items fourth Home in continued food kitchen quarter. Our for and preparation kitchen well the demand the remained floorcare. bedding, positive spaces where was business as bath living cookware, We electrics, strong saw and like as the for

by and fragrance driven our and Our Active also performed strengths Bath Body, with outperformed skincare. business, offering and the in quarter notable Beauty and children's well

was we underlying and margin margin, further was points which expected. XX to margin basis Turning gross gross year, than better QX improvement last down to was

during our despite in related of the basis points, approximately excluding the fact, basis holiday In significant points, XX was only margin penetration freight XX digital surcharges period. gross increase down

year-on-year. progress drove shipping further strategies merchandise management of pricing to major a the margins in cost inventory an and was This headwinds. increase promotion Our offset in efforts optimization disciplined

items. SG&A to Now payroll, Last, COVID-XX. let primarily decreased have me credit been to SG&A. almost fund Interest billion, touch discuss Of by would this to reduced and me due driven Depreciation expense note, expenses. down XXXX. last capital excluding In debt expenses $XX was $XX to than QX, in technology some X% outstanding increased million million $X.X marketing, expenses on let XX%, year store quarter. additional lower financial year SG&A due related higher during last lower versus

benefited losses planning $XXX tax in CARES Act, basis the and eligible Our share tax rate QX from was $X.XX. for for earnings carry back and our a under income On million quarter, GAAP net the strategies. was per

$X.XX. Excluding strategies. tax per non-recurring adjusted planning million quarter the $X.XX net tax of income driven for per was $XXX by and incremental includes items share earnings benefit, share adjusted Earnings

billion the from Turning than the quarter equivalents, with $X.X we cash balance of cash a sheet, $X.X last to ended and more billion increase year.

our cash strong strategy, to well resume highlighted. positions capital during year have I flow quarter the allocation generation as as full and Our

We quarter, We to composition tightening fourth of resulting last XX-year a XX% good in a inventory, in decrease and about in turnover. continue entering inventory marked manage year, our the high of the feel XXXX. inventory from

made store financial strides and in well to across expenditures progress cash quarter, by of of inventory our and were strategies our the good expenses. We Capital due is X% positioned reduced XXXX, to below X%. flow as year entered including $XXX our significantly COVID-XX. fourth billion driven $X.X the both the to we million about strategy our make This spending technology, of the generated stated operating our operating XXXX, fourth against the We further XXXX. omnichannel $XXX we goal against cash million flow, we positive in margin position. major and in Turning quarter, to in actions reduce feel strengthening last

for some uncertainty Turning the ongoing with the we planning remain to environment the outlined, in progresses. the pandemic. our continue outlook short-term, And a regarding for lot strategies macroeconomic remains the guidance are improvement impact to XXXX. although in as still just we in of There confident current our the we year cautious COVID-XX of

EPS a a operating one of mid-teens approximately excluding the also For we range increase interest and of year, $XXX expects guidance. X%, $X.XX, This percentage in embedded of $X.XX XX%. to the rate the I net assumes margin sales additional be and full currently range, to to within to range the would tax item expense non-recurring in be to million, like call X.X% guidance in of to charges. this out

We year, expect and revenue for net underperform quarter. credit in the the sales first to specifically

Given accounts the is balances and sales lower entering result extraordinary quarter year's strong This the sales are year, to increase. XXXX, some first coupled decline as time in up outperformance our take last with receivable in that remaining revenue build first quarter, in growth summary, followed was to the XXXX the decline In the an expected a in in credit year. in of by the quarters year. will

while future. the continuing focus managing on for the to through intense pandemic have invest navigated an successfully cash flow, We with

has additional competitive gaining our strategic the drive forward and future, to has to business look shareholder bright in Our further an strengthened. framework is executing against momentum and extremely our positioning value year. coming Kohl’s we

to this your are happy questions We at time. take

Operator

Drbul Guggenheim Securities. with first Bob from [Operator question Instructions] is Your

Your line open. is

Bob Drbul

Hi. Good morning.

Michelle Gass

Bob. morning, Good

Bob Drbul

Good questions. quick Couple of morning.

Michelle, process affected? for or will Jill, be trying the going women's the price I this next, sort to pricing are of plans few? sort rejuvenate helpful. this one there be that, the on And you're about the to your do the I if simplifying you next initiatives is, And of again. and over think optimizing what of keep on promotion strategies, or do the what but do Can you know, first initiative. talk sort is and don’t year terms that to the -- Jill, how the and of bit talk business in that Michelle a Can Thanks. about into would little biggest Kohl's business think you either cash

Michelle Gass

first Bob, start which Michelle, Thanks, with one, Great. here. on women's. is the your question I'll

commented So beginning with are as we in we our remarks, rebound, the that. business are we women's and to pleased see

we it down place mean, in Sonoma that Nine positive West brands and bigger for matter product the and So, brands, say, in a for than like with for have then, that the and the the that reinventing made our of for in elimination that. we fourth mean, trending strategy the into a then, in in us be and brand we're started bolder well even have I leaning of evolving we’ve course, put private We strategy brand would place us, seeing portfolio. done and that And XX the leaning -- in was which and starting significant and women's year casual that with and transformation really Vera investing ago. casual. I refreshing taking the and also will really it’s that had. I spirit Conrad quarter, brands a us, and first in new differentiating bolder that in And Simply now of restructure were quarter, women put Lauren like a so more the ever of lifestyle vision fourth strong be around really to LC for a then

Active I the and put vision casual it's think the much do a having in like brand about tighter said, sort we of focused really I So portfolio, out to lifestyle. around service

coming own launching announcements, working strong the brands of And has active course, brand side. then casual recent that things athleisure partners, be brand to women's So, starting broad We're which of lifestyle. And more a great lot assortment our a FLX, that fashion that we've and spent in on national Under Armour, brands have the Champion continue developing on in mentioned. with accelerating. some Around just time it's of been to Adidas. Nike, closely us in year, very coming women speaks called with the that athleisure, the side, we our three I for the

situations. brands situations like noting You we going leader significant amplify casual more can from Levi's, have wear a Also, that a especially We're in with more or active further, Sonoma. in like it wear to it value brands national then a opportunity our and Denim. We've worth it's that been in Denim. standpoint,

opportunity. is a customer. new never this shop a reduction, transformation categories, in bold that count then in choice experience. that’s addressing bold inviting the it coupled it's We've sure. big, for significant much shopping and So brands that in day for simpler, more women's been and And with investing so to easier, in And,

And things well both job majority of from We're bar. outfit and across with mention starting doors stores taking online brands. the would what then to the will is customer, and XXX last learnings a XXX hand Sephora, next and we're second And to thing introducing to the a to do our better effect in on rolling categories, like female match mix customer. fall, Sephora question. I'll halo women's our investing other a over expectation it our that your and will out outfitting. launch business. new Sephora, years a So mannequins and this doors, especially customer, And then younger on transcend And have the as then is going Jill and attract to three that that the taking across over I we're

Jill Timm

say no value from see the public to more gives but we gives is to general a There's Kohl's Kohl's credit programs. be about It perspective, changing rewards that working, that category offers. into key offers Good second We our you offers ecosystem. a cadence that in across Yes. actually up part because the obviously I see really program were we loyalty really move of going and morning, that everyone, didn't as as hopefully us believe cash is the us we underlying how trip, would giving into card you and our it productive. is can differentiation promotion, cash our and for On that it value differentiator. program more pricing Bob.

to we're being as what's saw the that QX, move working QX, continued that And in in margin for then those us. productive referenced really offers, into move that's more that and and targeted into up we really a that quarter. we much out being behind So able driver merchandise

COVID. what you'll So from our and been see expansion. to testing offers this contributor we've see continuing that a continuing learnings we We've that's margin key were during out for being And a And that moving to you'll accelerate of and had. really while. these XXXX into able

Bob Drbul

much. Thank Great. Good you very luck.

Operator

Hutchinson is question of Lorraine America, next Bank from Merrill Your with Lynch.

open. Your line is

Lorraine Hutchinson

contextualize Thanks. grow 'XX Or Are and there? sales levels to the sales sales margin? back your Good X% get targets? piece of to What get baked you morning. to of how X% in sort from to long-term XXXX that we should into recovery expecting kind to

Jill Timm

Sure.

about drive getting in about a The to suggest supply would dependent to talking say inventory back obviously promotion, and the in X% to will years. comments. mid-teens out say, consumer as levels. efficiency XXXX our that continue overall. is to what we'll But I get expect can management us to work expect that and not looks sourcing, what like. SG&A, cautious just the X% do would and hit first, obviously look recovery outside would and optimizing our see really X% see sales So then continue it's like. pricing we margins say we obviously we being We levels. tried hard look But half through that we're to XXXX We I back on to chain, the recovery and as the the levels for us tell X% do improve the hitting we does We're out of to

that we initiatives brands we women's hit spoke be going do we drivers. with to really say Sephora a great to call being X% of this to expand that. really obviously just going we're because beauty add are is the into with those would the on with year, space mentioned, to drive then starting to in underlying Active assortments initiative how should back-half I growth. stepping But have those And that and we of three continuing Now Starting X% that key what that as that new that, top-line into of lot think with, and Michelle area. accelerate said,

Lorraine Hutchinson

you. Thank

Operator

with next Your Baird. is from question Altschwager Mark

open. is line Your

Mark Altschwager

Thanks morning. taking good for my question. Hi,

issue you much all the your given I annual said, on to also So outlook willingness uncertainty. top-line, know an appreciate very the ongoing

Just to the positive stimulus sense outlook some On way. more side, macro uncertainty of, side, ongoing hoping the from and underpinning the on that the to a just a guess negative COVID, get potentially related what's obviously perspective? better I

those factors plan? closures, what standpoint, revenue competitive rollout will for well how And the of how curious from the Just as any have this you're been in details a any Sephora as quantifying share the Kohl's potential incorporated in back-half you be year from growth on benefits mid-teens thinking expectations can specific the year? the about then

Michelle Gass

here. morning, Good I'll take Michelle, So and this. Mark,

pandemic say remarks. that be off, front-half, we've from in everything back-half, I accelerated. that about is our you to standpoint, and it first into continues the would say seen guidance just about through our we we the So have spoke If baked drivers talked front-half the I'd about and the mid-teens that think

are continue a like a home, It's less third being across over And strengthen to launched some business. eliminating of about athleisure, categories that by that's mentioned End. year, Bauer I we get are our get important, it's we it encompassing, roadmap to amplify home, know, earlier. we're this think all when we We fact brands are it's we're And so active, have And XX% brands Land's to just productive. So we that that business. And our Eddie categories. strength We space expanding you outdoor. it's and it's active, in talked as in our say how actually FLX I introducing going coming. to Active seeing multiple at the we on least

top-line Active, overall So stores. really I especially driving think productivity categories, those we is our in given this see the instrumental to of on

mentioned front-half then the in the to first-half And into us is home. the So active, its it's of business rebounding, so women's help digital. that We course, we expect second-half.

will expecting stores. there gets us our continue we know and families of hope, front-half been many, passed, a will will because under anticipate We that are pressure year. this in that to have that that does that do it be pressure stimulus help the like do help that lot on We

in I we normalcy, the very then lots of gap, that. in the been helps back-half think year. published the there's are that we if this, much anticipating and on are to of So favor until we And get but

Some and vaccines more folks up. et the economy seen normalcy will their return numbers. opens like are to publish And cetera, NRF, begin as widely distributed you've

getting back-half for I from home, they seemed time much working in to shopping the beauty, kinds in would continue. customers not think sell. do I will people apparel, the drivers from those be out a normal as their same their that as Notably to buying cetera, believe spent actually so safer of homes, that expect stores the lot only of things be be we et there to our a of to return homes. stores, accelerate but footwear, for opportunity life. feel And We with us on front-half

traveling to and back like. Going work, the

will play of pandemic during convenience, like continue think type the I that the have thing. strengths that curbside to heightened given off mall our our things to position, like factors offerings,

also lean standpoint. channel digital And kind on as I Sephora, into was But pandemic. But to we in tremendous Sephora. XXX opportunity bit the I surely flip wanting in probably August start talking thing the store go about expect that, X, very omni going that the of that an a big starting then the us, for come a they'll our So completely And of the we'll be of the doesn't do the more to like away. strength see big on in said, they, last rollout back-half again, deal than is from doors. collective

and from mid-teens all out confidence on our standpoint, we put X% guide did of then that to and X%, X.X% profitability from X%. have yes, our So strengthening the our in to leads why top-line to get to us journey with to

Mark Altschwager

great Thank That's you. color.

quick margin stores on potentially some as Just a to share year? Any how through the gross follow-up. this help recapture think implications

Jill Timm

SG&A the a from So X.X% benefits taken say the don't into account We've obviously, of to because the margin, an perspective. efficiencies profitable X%. more stores, with well gross the I context we channel, would from have shipping, in is as they're cost as but to

in them. productivity So we'll continue to stores as our we drive open

through as to have just open to of time, because we learned remainder as mentioned we be persist for lot think don't the continue pre-pandemic. widely I localized were we as that know hours. such a COVID, And we we will

the would from would a utilize perspective. be us So, fulfillment XX% to sales that them a as tremendously open obviously, fulfilled digital up. of obviously say benefit stores And our they about do this We year. I

can coming digital what than we in open, performing and saw store. had would And offset just the XX% down getting given digital last We we the closures from sales see lap heightened stores would expect in of XXXX way. penetration you comfortable some them help then that seen into this the year a as closures. better using consumer at more the really year. the So that'll as they slightly, to different Obviously, stores come due the

Michelle Gass

in being stat with it's transformation cash product health And our we ahead. in in would of especially we're portfolio, base. like positive the the on We the closed, just share, on weeks, the I Mark, really there opportunity say positive. me and the are. just flow asked shared benefit our historically what's doors you We and the years past year, Hey, X and that and about the Bon-Ton store market the cash sector, well XX change. closures much really how still there. with did of at down. from few the the even of amidst positioned. stores concepts part like for store XX% close was we add gained underway we I and stores think the were I'd at well. as and so flow thing, of feel a is one have as update have and the the mean, brand like store pandemic pressures We've XXXX, department our got that store portfolio you look analysis the But when going We last a through industry looking particular, And I actually opportunity us

third So, Sephora. of unique then think Amazon Amazon our the we like. we've store which and and home destination And our as and driving getting the customers And the thing revitalizing it's advantage with it's at can the brand Kohl's same stores. I women's I been just And new, not shared of drove power like last speaks than of new identify of least even It's business are can to it, active more our customers that X believe with in the we but our go remarks business, the health but footprint, too. also to a we from as take add million omnichannel strategies would customers we but our customers after we is, of in just in Amazon, partnership. continue to particular, talking stronger new as going new curbside to millennials. things our we're about only And

strongly So, to really positioned ahead. we're market I in share years think capture the

Mark Altschwager

again. Thanks Great.

Michelle Gass

Mark. Thanks,

Operator

Trussell Your next Paul Bank. with question is Deutsche

Your open. line is

Paul Trussell

the morning. the conversation I to Good thank right And continue you for color. now on wanted having you're the all Michelle. top-line,

the What truly the seen younger you time, excited have business halo just customer have what to to store? have partnership to what months ago. mentioned to in-store? that that expect strategy speaking Amazon that announced shop effect, learned? is you specifically being has are and categories customer that What the to you attracted You brands at Sephora that And how you halo the a Sephora, partnership the get Since effect. extent Can And few since? of with you the you you your think going discuss be to?

Michelle Gass

question. Well, that for in there. there's few you And a thank Paul,

the digital. Kohl's. So in we the it as excited customer our Jill store, it, of over to miss a us. opportunity bring say more get changer that look to in we transform transform unmistakably fill And beauty the I all, the further you I'll get relates a Well, saying, of is entire but to and to new experience, as for just clearly younger the business, It if I will game here partner the mean, I'd customer it company. in. were to Sephora, going it's the my we bigger into first see anything, front

store, beauty. the that our parties, them, dramatically that, we locations, reach have say out multiple getting experience, a off experience. to brands really global of be lot announced to a And opportunity But be we a more like, and the at, And leveraging on like, creating and then closely, of discovering So, a which are both I mentioned. development experience to digital brands since then, side. unique the new and than the These as the discovery Sephora leader for we true and seen, going which names those us. to continue for their they're you with so I earlier. out mean, customer. their And bringing the of brand around ourselves fronts, and several with brands, of That’s people come it it's leadership, both of transformational extends are in their very initially is does, the personalization, lot we XXX mall myself, the the from the to that, of capabilities Sephora the -- this new acquisition, out a into I and of Sephora programs taking loyalty that working I'd world these might relevant the CEO build and on get made starting whether remark the differentiation. been Sephora imagine, excitement, customers best the with build will of brands

in to deal. how be we but great going a they've So market. that's brands, those And go big think not very like they a I only said, got finding expertise to

foot stays entire our drive then everything around That are like the same. that shared X,XXX experience the the it's to else going the store, are they store, not so together that, are refresh lift. and build store well. of that. coming actually plans really just the We've And fact we going taking opportunity and Sephora square we the to create this the really, So front to

choices. strategy a categories narrow customer, athleisure, demographic, clarifying to mean, around but our casual, the attracts reflowing a broad female then our reflect brands are as set demographic. I active, it We And younger evolve will to it more or it strategy new of really relates attract our

brands, of that we've in for we think discovering see our then got whether new Lauren and So but coming. Conrad, brands again or side, had parts customers some announced effect, brands I we'll it's few like flagship we business, whether on private all more and of yesterday, just a got we time bringing like Klein, the Sonoma some the halo these with our Calvin

in customer these enhance into our our profitability. online, stores our and all experience, So completely broad fits reinvent and doing also the to that in both of so, brand portfolio, roll and the to strategy

Jill Timm

comp talked by the Paul, and we trips. we just beauty a And that want transformational couple we've we've two really talk It's effect if saw across acquisition. it's than our had, launch is And you think testing was about in overlap to incremental means back remind did beauty put store. our not about store. think replenishment And that we've And of in the item just that store, done Sephora times more halo about that. really we you, to much the only about I last driven anything have customer obviously the low it's the I trips, customer we

previous we in be sale, that through beauty them this reminding environment. as our can we Through well really as And we again with involved the trip much compelling program, that introduced that more expansion, refresh around beauty. see really we Active additional the just than do that saw efforts bring our it's they new the then them as get Kohl's you, So insider. loyalty, get in, into

Paul Trussell

Amazon, the Amazon the seen Anything from helpful. you've very effect on That's standpoint? what from halo

Michelle Gass

No, absolutely.

So their engagement based it and new million to It But X to have continue did to driving quantify as be think on relates ability, is and terms the to data Kohl's. pleased driving traffic, the new with is We we at the very partnership. of brand Amazon, our offer of we we transactions it the in best least usage. customers.

get them And year-on-year, we millennial customers, attracting third that are excited really our a of younger think customers. I conversion.

returning is year-on-year. up conversion So in, the something of from Amazon, traffic the coming actually that’s

great converting. So as in the doing are comes teams job, a traffic the

and that the profit And on on top-line of well. side net so all the is leading incrementality to as incrementality

to going to partnership. we're continue drive this So,

probably mentioning that experience customer both customers, think it and really world-class this happy. the results I existing worth platform. as terms of And engagement, we in customers are get new it's also relates that parties through our just to experience

Jill Timm

customers in I the value the are would those thing lifetime it's customers. And QX, that the add only of million is, to but X

we we recurring bring in, So, the trips them. monitor them from

to benefit the that us. really that's persist for continues So

program. to that And of to more accretive points is can trying give earnings. reiterate data it enough you never this I to just we're benefit obviously, the So

Michelle Gass

clarify, the think said, X Jill the million quarter, I year. X to in million in Just

Jill Timm

year, that. sorry The about

Michelle Gass

into gain overall, And across we more X lot QX, in do. a did digital channel. new of million But as our coming year. the we those customers typically especially

Paul Trussell

ramp XXXX, maybe Thank Jill, out Also, run priorities? over even up of the how you. think to Sephora cash kind rate CapEx sheet. And gears to stores? could ramp picture, the are just And as lastly, up philosophy bigger you'd been you switching balance metrics lead the in would repurchases initially about you you share through of talk roll outlined about than we to what's that what leaseback a focused overall on that be has terms should here? And monetizing how if [Indiscernible] approach of you've kind that lastly, know approved? you and the sale what more

Jill Timm

Sure.

year, year. think million I about obviously, a the Historically, we I and stores. next to capital more XXX. $XXX changed. do cash Sephora about going This invest So to it's first haven't allocation business. foremost, to first priorities think that'll taking always We're back step our in we're XXX our up year, do spent

rollout, half includes Sephora -- over this expansion, store driven, be the year and little program, think going it's launches, half as the obviously pivot will our then the and I brand normal more just the to CapEx the store stores. refresh is be -- maintenance It well. much a active

now be strategic that going have obviously so And we're we're investment we technology. at from made that actually see a to historic tax drive we You're outlined will levels, leveraging big initiatives in to where the a our today. place down really

first. So that's

the been has dividends. Second

that continue over So, since dividend quarter. growing we'll with increased to just we've the we've We time. reinstated this dividend XX% it a at look and And reinstated to XX% back, year. sustaining

so that repurchase share program. And really been the then has in balance

as And as we And really especially in XXXX This cash of pandemic, and we've shareholders. we generated of evenly back put about closed. billion, our billion that at much shareholders as returned were to course, our so looking year, the typically in to what XXXX, $X.X look share we as We're free program did place debt. preserve we've From we and is, the cash generation more flow. to the when cash obviously possible, were $X as through repurchase dividends. stores

leverage now really the at So and look right and profile, debt we'll maintaining back get some a our from ratio back come ourselves optimizing into that grade repurchases and to investment rating. perspective, doing range leverage

continue I look dividend back So forward can generate history, through both we and will return the we're think at as we move to it cash, going thoughtfully we it, you obviously return but terms look us sale in is, efficient and the leaseback, we what at financing. cost of our for program. and And the share then to the of repurchase capital get most to means

pandemic, estate able place real did rate, efficient the because that We that were did. of our saw to the During leverage market. we at more a some you could then in we do we

cost into year. the lot a capital flow. on As got We cash investment sheet with rating, market balance cash. of of capital think we needed as we our end grade cash find you we $X.X if Obviously, look little today, rates be we generate less a the the at debt if billion of the that we can we our have

we and our And out have see that a it. not do to assets paying debt. a place find place it's go need So for to we strong additional

mentioned, As of even are the flow were the pandemic $X still still XX% positive, and stores vast majority million. productive, those within our cash incredibly Michelle them of were over

we're So, that leveraging our it I bring out think, to cash back to asset to generate really shareholder.

Paul Trussell

Best Thank of luck. you.

Jill Timm

Thank you.

Operator

with question Paul Lejuez is Next Citigroup. from

is Your open. line

Unidentified Analyst

year. mentioned going partnership, the anticipate you earlier And rolling year. any Paul. centers? it's and small wondering more How in and this those with strategy And out Thanks. the I of the are grocery doing? this more Thanks. for if how of those you stores those with of It's, fitness was Tracey Jill, doing filling standards your

Jill Timm

Tracey. Hey,

one testing. So, we rightsize think we've that a And is I think, been as to company. innovations I of continue those innovate

we square center as look can our will capitalize we traffic way a talked on highly big to us great that some store to drive taking do about other rightsizes successful pandemic, which a we partnerships. footage footage, rightsize being we read hard can we've for all to store for partnership, be really obviously, the was With utilize the the into these them these one in right to flows in more how is The would and those Fitness this think Obviously, and and see even the get how fleets, store differently. that at of Sephora we on of footage, during So square monitor some be. our test have square see and a What I can some say our continue is, of really markets and would Planet us being we and was it to work. productive.

some with We have you've as probably done, seen well. rightsizes Amazon

this say just would big the still but spirit innovation. I it's the So is of test, a in

work won't. in this will going bit of tests some longer some to one and of just lasts. a it these And And long terms how little is be

is I less in think still than stores. this XX

this. overstate the want don't think But continue that have. So it's I we us for a I to optimize real to way impact estate of the to

Unidentified Analyst

you, Thank guys.

Operator

question last Your from Stephanie is Wissink with Jefferies.

Your line open. is

Stephanie Wissink

you. quick morning, Thank questions. everyone. really Two Good

see back up, the through core turns, minimum? some inflation standard question. but is terms Are operating indexed your is that's sales? question to of elected restock. the over of those indexing you on then we over that wanted for power the inventory your an goals wage or in rebuild So to to the you anticipating policy of just So minimum clarify categories? planning or margin you're one. to year. in earlier the And Michelle think in this question an either hope Thank your on based us But back your goes Help also on guidance assuming I you build first, think $XX to kind that rate a Are on categories two, way just you. go

Michelle Gass

Steph. Thanks, Sure.

the with of one in So, I'll start terms first inventory.

like and we're down quite the down we significantly as we metric was key that as our inventory sales. quarter, turn you the as our than more about And into a significantly ended forward. know, baking we So inventory what that is look and

did a quarter, little were in we active. fourth that Jill I for and those So high really pockets as the it like wanted, a would than in XX-year that notably mentioned, was well, areas home certain say at we higher

active rebuild back the back, in your categories will to home we in point, rebuild categories. we especially So the as

We have brand relationships partners. our fantastic with

they that mean ahead sure fresher way chief put our the mean everything question will good to are inventory But lot going a our I get Jill. and everybody as and levels. is to run merchant make this there's there's question, it a doing hopefully that and support exceed And can even to know we And we on that. And no us. So turn. out focused, they chase, our over for from goal And a tell that. others we're to of next It's We maintain drives and our are of inventory about Because Jill around. our discipline. Xx to and an goal we will sales your product. margins hit then win-win I it. that with hand aligned completely I'll all and I better we yes, to you,

Jill Timm

Good morning, Steph.

X% averages we had assumed has range X% what is historical within will as wage inflation, we our an said I the we're first, us So second, our And rate that we had $XX. for rate, which for $XX But to tell a been fulfillment on wage in that hourly estimates above full-timers in you that given. actually in stores, have rate average centers. we our

year a into making we those approach. don't So making that. we adjustments, take We are every are but progress blanket

a Obviously, us in today. the approach out We So, pressures. of if stores gotten in turn, we'd as for the and kept our obviously by overall we’d lot culture Kohl’s, nice we've that's look we tenured in past. having our well. at us take adjust of legislatively, that lot really on how market worked for market how stores, competitive We on that's And come also people it, do based staff accordingly. a we really credit for a based

continue comfortable watch me facts we're with moving. those helped inflation. where couple that But the we'll wage are think, a So, to of I rate get

Stephanie Wissink

Thank you.

Michelle Gass

speaking the on call listening to May. in today. look to you We with Thank Steph. you, you everyone Thank forward

Operator

conference This concludes call. today's

may You now disconnect.

Kohl's (KSS) 2 Mar 212020 Q4 Earnings call transcript